The Karnataka High Court has ordered the state's commercial taxes department to refund ₹16.1 crore in cash to e-commerce platform Flipkart . The amount represents 70% of a pre-deposit the company made in response to a tax demand. Justice S.R. Krishna Kumar also directed the department to pay applicable interest on the total deposit of Rs 23 crore. The case dates back to reassessment orders from 2016-17, under which the department classified mobile phone chargers as "unscheduled commodities" and imposed a higher tax rate, resulting in a demand of Rs 23 crore from the Walmart-backed e-tailer. Flipkart challenged the demand and made a pre-deposit, paying a portion in cash and the remaining Rs 16.1 crore using input tax credit (ITC) from its electronic credit ledger (ECL).
Why Karnataka HC wants tax department to refund Flipkart in cash
The department refunded the cash portion but withheld the amount paid via ITC, arguing that a cash refund was not applicable. The High Court rejected this argument, ruling that all refundable amounts must be paid in cash, regardless of the original payment method. The court further clarified that a charger sold with a mobile phone is a part of a single package and cannot be taxed differently.
How Flipkart became eligible for the refund
Flipkart challenged the orders before the joint commissioner of commercial taxes (appeals), but the case was dismissed in 2017. The company then deposited 30% of the total demand, which was Rs 6.9 crore, in cash as a pre-deposit.
Later, it appealed to the Karnataka Appellate Tribunal (KAT), Bengaluru, in July 2019, and deposited the remaining 70% (which was Rs 16.1 crore) using ITC from its ECL. The department accepted this.
In March 2022, KAT ruled in Flipkart’s favour, and in 2023, the high court dismissed the department’s revision petitions, thereby affirming the order.
This made Flipkart eligible for a full refund of its pre-deposits. However, the department refunded only the 30% cash amount and withheld the Rs 16.1 crore ITC portion, leading Flipkart to seek relief from the high court.
Why Karnataka HC wants tax department to refund Flipkart in cash
The department refunded the cash portion but withheld the amount paid via ITC, arguing that a cash refund was not applicable. The High Court rejected this argument, ruling that all refundable amounts must be paid in cash, regardless of the original payment method. The court further clarified that a charger sold with a mobile phone is a part of a single package and cannot be taxed differently.
How Flipkart became eligible for the refund
Flipkart challenged the orders before the joint commissioner of commercial taxes (appeals), but the case was dismissed in 2017. The company then deposited 30% of the total demand, which was Rs 6.9 crore, in cash as a pre-deposit.
Later, it appealed to the Karnataka Appellate Tribunal (KAT), Bengaluru, in July 2019, and deposited the remaining 70% (which was Rs 16.1 crore) using ITC from its ECL. The department accepted this.
In March 2022, KAT ruled in Flipkart’s favour, and in 2023, the high court dismissed the department’s revision petitions, thereby affirming the order.
This made Flipkart eligible for a full refund of its pre-deposits. However, the department refunded only the 30% cash amount and withheld the Rs 16.1 crore ITC portion, leading Flipkart to seek relief from the high court.
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